Presentation on theme: "Recording Adjusting and Closing Entries for a Service Business"— Presentation transcript:
1 Recording Adjusting and Closing Entries for a Service Business Chapter 9
2 Adjusting EntriesJournal entries recorded to update general ledger accounts at the end of a fiscal periodThese are recorded on the next journal page following the page of the last daily transactions for the month
3 Adjusting Entries So Far! SuppliesPrepaid InsuranceThis information is obtained from the work sheet.
4 Permanent & Temporary Accounts Permanent Accounts (real accounts) are used to accumulate information from one fiscal period to the next.Include assets, liabilities, and capital. These are carried to the next fiscal period as the beginning balances.Temporary Accounts (nominal accounts) are used to accumulate information until it is transferred to the owner’s capital account.Include revenue, expenses, drawing, and Income SummaryShow changes in the owner’s capital for a single period.
5 Closing EntriesJournal entries used to prepare temporary accounts for a new fiscal period.They must be reduced to zero at the end of each fiscal period.
6 Income SummaryA temporary account to summarize the closing entries for the revenue and expense accounts (i.e. junk account)No normal balance, the balance is determined by the amounts posted to the account at the end of the fiscal period.
7 Four Closing EntriesClose Income Statement Accounts with credit balancesClose Income Statement Accounts with debit balancesEntry to record net income or net loss and close Income Summary (done in one shot)Close owner’s Drawing account
8 Post-Closing Trial Balance After the closing entries are posted, general ledger accounts with balances are added up.The total debits must equal total credits.
9 Accounting Cycle Analyze transactions Journalize Post Prepare WorksheetPrepare Financial StatementsJournalize Adjusting and Closing EntriesPost Adjusting and Closing EntriesPrepare Post-Closing Trial Balance